Chancellor Rishi Sunak has today announced billions in new spending in his autumn Budget announcement, including a significant amount on business rates, levelling up and innovation.
Here are five key takeaways from the announcement.
Business rates
The chancellor has yet again declined to push on with a full-scale overhaul of the business rates system, instead electing to appease small business owners and landlords with a 50% discount for retail, hospitality and leisure sectors for one year, up to a maximum of £110,000.
He added that next year’s planned increase in the rates multiplier will be cancelled, a move the chancellor claimed would save businesses £4.6bn.
The levy will also get a new, three-year revaluation cycle and a new relief for on-site green technologies. That means that until 2035, plant and machinery used onsite for renewable energy will be exempt from business rates.
He also announced a so-called “improvement relief,” meaning that from 2023 businesses will be able to make property improvements, and for 12 months pay no extra rates.
Jace Tyrell, chief executive of central London lobby group the New West End Company, said the changes were “encouraging”, but added that a more radical reform was still needed.
“By capping the 50% high street discount at £110,000, the benefit means little to city centre businesses. For a store in London’s West End, it will result in less than a 1% cut in their business rates bills for just one year.
“This only results in a cut of around £1bn each year on a £25bn business rates bill – the equivalent of a 4% cut. This falls far short of a fundamental review and is a very disappointing outcome.”
The Treasury will also consult on an online sales tax. If introduced, the revenue from this could be used to reduce business rates for retailers.
Levelling up
Sunak promised nearly £7bn of spending on transport infrastructure, including just over £1bn each for Greater Manchester and the West Midlands, and £830m for West Yorkshire.
However the policy, which was billed as a key part of the government’s levelling up agenda, includes only £1.5bn of new investment. The headline figure includes £4.2bn which was announced in 2019, plus funding for buses which the prime minister revealed last year.
This is all designed to support London-style transport across the regions of England, he said. A spokesperson for London business group London First said: “The absence of a funding deal for Transport for London is deeply disappointing.
“London itself won’t have the ‘London-style transport network’ that the chancellor says he wants for other parts of the country if it doesn’t get the cash it needs to keep services running.”
Sunak also announced the first £1.7bn of allocated spending from the government’s so-called levelling up fund. Sunak said the money will be invested in ‘the infrastructure of everyday life in over 100 local areas’, with £170m for Scotland, £120m for Wales and £50m for Northern Ireland.
The chancellor promised £850m to restore museums and art galleries including the Tate Liverpool; £125m for a scientific research centre in Oxfordshire; £75m for regional museums; and £700m for football pitches, tennis courts and youth facilities.
Housing
Meanwhile, it was a mixed bag for housebuilders, who were presented with a new tax to pay for the removal of flammable cladding from high-rise buildings.
The levy, for residential developers with profits of more than £25m, is expected to raise at least £2bn over the next decade for remediation works.
MPs have previously estimated that the cost of fixing the crisis – which was tragically brought to the fore of the public’s attention by the Grenfell Tower fire – could total £15bn.
Housebuilders will also benefit from a £1.8bn cash injection, designed to help brownfield sites covering the equivalent of 2,000 football pitches to be turned into plots for new homes.
The Treasury has said 160,000 new homes could be delivered on regenerated land across the country, as well as transport links, schools and community spaces.
Grant funding worth £300m will also be handed to metropolitan mayors and councils to unlock smaller brownfield sites for housing.
Meanwhile, a new £9m levelling up parks fund will give cash to local authorities to spruce up 100 neglected urban spaces into pocket parks, which are small areas of greenery roughly the size of a tennis court, in otherwise built-up locations.
And Sunak added there would be a £65m package to support the digital transformation of the planning system. Melanie Leech, chief executive of the British Property Federation, called it “a welcome start”.
“Ensuring our planning system is fit for purpose is critical to delivering on the government’s levelling up agenda, and if the government ambitions for planning reform are to be realised then all parts of the planning system including decimated local authority planning departments will need to be better resourced,” Leech said.
Economic growth
The chancellor said forecasts from the Office for Budget Responsibility show the economy will grow by 6.5% this year. It will take until the start of 2022 for the economy to return to its pre-pandemic size, he added.
GDP will grow 6% next year, then 2.1% in 2023 and 1.3% in 2024. In March, the OBR had forecast growth of 4% this year, after it plummeted 9.9% in 2020 – the worst recession in 300 years.
The OBR’s estimate for long-term damage for the economy has also been revised down from 3% to 2%. Unemployment is forecast to peak at 5.2%, down from a forecast for about 12% forecast last year.
Meanwhile, Sunak also announced a hike in the National Living Wage to £9.50 an hour – an increase of 6.6%.
Innovation
Sunak said the government will put “unprecedented funding” into innovation, increasing R&D spending to £20bn a year by the end of this parliament in 2024.
That is down from his previous commitment in March of £22bn per year. However, it still marks a 50% increase from the start of this parliament – the fastest cash increase ever, Sunak said.
As a result, R&D spending will rise to 1.1% of GDP, Sunak said, in comparison with the OECD average of just 0.7 per cent.
In the US, R&D spending stands at 0.7%. In Germany it is 0.9%, and in France it is 1%. This investment is part of the government’s mission to make the UK a “science and technology superpower”, Sunak said.
Jennifer Townsend, partner in commercial research at Knight Frank, said: “Given that there were fears of the government renegading on its promises, this will be a boost for the life sciences sector and other innovation-led industries such as technology and activities relating to the net zero transition.
“From a real estate perspective this should add further confidence that these innovation-led sectors will represent significant occupational demand over the next cycle, and investments should be made to deliver suitable spaces for these customers.”
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